Whoever invented the idea that parents should sacrifice their own future for their child’s future could have foreseen how expensive it is to send a child to college. It may be a noble cause to pay for your child’s college education, but that college degree often comes at the expense of a parent’s financial well-being.
An August 2022 US News & World Report survey found that parents who borrow student loans for their children often delay their own financial goals to help cover college expenses. Nearly half (about 48%) of borrowing parents have taken out more than one student loan to fund their child’s college education, and many respondents have been paying off their debt for a decade or more.
The data also explores borrowing trends among parents, such as the type of loans they have borrowed, the loan balances they are carrying, and their hopes for student loan forgiveness.
- Choose the right loan: Parents borrow a combination of federal and private student loans to help their children pay for college. More borrowers used only federal Parent PLUS loans (43%) than only private parental loans (30%), but more than a quarter (28%) borrowed both federal and private loans.
- Focus on Forgiveness: The vast majority (79%) of student loan parents are considering using remission programs. Among them, income-based repayment plans (45%) and civil service loan forgiveness (31%) are the most popular choices.
- Make sacrifices : Three in four borrowing parents put their own financial goals on hold to take out student loans for their children. Respondents report delaying retirement, buying or selling a home, and changing jobs because of their parents’ student debt. In addition, 43% regret taking parent student loans.
- Bridging the gap: In addition to student loans from parents, 43% of respondents had to borrow extra money to pay for their child’s college education. Of those who did, 59% used a personal loan, 36% borrowed from their 401(k) retirement fund, and 21% tapped into their home equity with a loan or line of credit. Additionally, 34% have incurred credit card debt.
- Progress report: Most borrowing parents (81%) originally took out their student loans between 2011 and today, while only one-fifth currently have loans that were taken out in 2010 or earlier. Respondents have had measured success in repaying these loans: While 73% originally borrowed $10,000 or more, only 54% owe that much today.
Borrowing parents prefer federal loans, but private loans are also popular
When borrowing student loans on behalf of a child, parents are faced with a choice: borrow Direct PLUS loans from the federal government or go through a private lender. Each option has its own advantages and disadvantages, and the right choice will depend on the applicant’s creditworthiness and loan repayment terms, among other considerations.
Our survey found that parent borrowers chose federal Parent PLUS loans at a higher rate than private parent loans. Among parents who borrowed on behalf of their children, 43% used only federal Parent PLUS loans, while 30% used only private student loans. More than a quarter (28%) of respondents borrowed a combination of federal and private student loans for parents.
Although parents slightly prefer federal Parent PLUS loans, they actually borrow private student loans at a relatively high rate. The majority (58%) of parent borrowers surveyed either used only private loans or used them in addition to federal loans. In contrast, only 5% of undergraduates took out private loans for the 2015-16 academic year, according to The Institute for College Access & Success.
4 in 5 parents of student loan borrowers rely on forgiveness
Some parents may choose Direct PLUS loans over private loans due to enhanced federal protections, including access to certain student loan forgiveness programs. Meanwhile, private parent loans are generally not eligible for federal debt forgiveness.
The vast majority (79%) of borrowing parents plan to use student loan forgiveness programs. The most popular choices were federal programs such as income-based repayment plans (45%) and civil service loan forgiveness (31%).
It may be a wake-up call for the 11% of parents surveyed who hope to use “a different kind” of student loan forgiveness. Other than the federal programs offered by the Department of Education, many of which have strict eligibility requirements and limiting prerequisites, there are very few options for getting student loan debt forgiven – other than perhaps the bankruptcy filing.
For many borrowing parents, student loans have been insufficient
The skyrocketing price of a college education sometimes leaves families looking for other ways to pay college expenses. In addition to student loans from parents, 43% of respondents borrowed extra money to pay for their child’s college education.
Among parents who borrowed extra funds to pay for a child’s college education, most (59%) chose personal loans. Since these loans generally don’t require collateral, they can offer quick, unsecured funding, but usually at a higher interest rate than traditional student loans. Similarly, about a third (34%) of parents took on high-interest credit card debt to help their children pay for their education.
Also of concern, 36% of parents borrowed from their 401(k) retirement account to help pay for college expenses. While a 401(k) loan can be a low-cost borrowing strategy since you’re paying yourself more interest, it can also eat away at your retirement nest egg. And as you’ll see below, that experience is shared by many of the parents we interviewed.
Parents often sacrifice their own financial well-being to send their children to college
A college degree can help your child succeed professionally, but that success can cost parents dearly. Three-quarters (75%) of student borrower parents have had to delay financial milestones because of their debt, including retirement (31%), buying or selling a home (30%) and a life change. employment (22%).
Unsurprisingly, 43% of respondents regret having taken out student loans for their parents.
Where are the student loan borrowing parents today?
Borrowing student loans from parents can seem like an endless long-term commitment, and it certainly is for a sizable minority of borrowers: one-fifth have been repaying their loans since 2010 or earlier. Here is the breakdown of when respondents issued their parents’ student loans (numbers are rounded):
- 2017 to present: 54%.
- 2011-2016: 27%.
- 2005-2010: 12%.
- 2004 or earlier: 8%.
Yet most parent student borrowers have been paying off their debt for less than a decade and have made steady progress in reducing their loan balances. While 73% borrowed $10,000 or more initially, 54% currently owe the same.
Only 7% of parents have borrowed less than $5,000 in student loans for their children, but now about a fifth (21%) of parents owe less than $5,000. On the other hand, 16% still owe $20,000 or more, which is still much lower than the 24% of parents who borrowed that much to begin with.
It’s important to zoom out for the big picture: Across the country, parents continue to pay student loans on behalf of their children, often long after they graduate. In addition, a quarter (25%) of parents did not initially expect to have to borrow money to finance their child’s education. Although they planned to borrow student loans, 20% borrowed more than planned.
When deciding to take on debt in your own name to fund your child’s college expenses, it’s important to set realistic expectations. Be sure to weigh your options carefully and consider consulting a financial adviser if you need more practical advice.